ong Kong’s stock market witnessed a decline from a three-week high as property developers led a retreat due to escalating concerns regarding debt defaults, which overshadowed Beijing’s efforts to stimulate home sales and rebuild market confidence. Additionally, Sinopharm Group, after being added to the benchmark Hang Seng Index, experienced a significant slump.
At the local noon trading break, the Hang Seng Index registered a 1.5% decrease, falling to 18,559.92 points. This decline followed a strong 2.5% rally on Monday, pushing the index to its highest level since August 11. Simultaneously, the Tech Index also dropped 1.5%, while the Shanghai Composite Index saw a 0.6% decline.
Among the notable losers were Chinese property developers, with China Resources Land sliding by 4.8% to HK$34.70 and China Overseas Land and Investment tumbling by 3.2% to HK$17.34. Tech giants Tencent and Alibaba Group faced losses, with Tencent declining by 1.7% to HK$327.80 and Alibaba Group weakening by 0.3% to HK$92.90.
Sinopharm Group, on the other hand, experienced a substantial 4.3% drop to HK$22 after it was added to the Hang Seng Index membership, effective immediately. This move replaced developer Country Garden Holdings, which fell by 2% to HK$1. Skincare producer L’Occitane also witnessed a significant decline, plummeting by 25% to HK$20.80. This drop came after the company’s chairman decided to halt the process of taking the skincare producer private.
Despite these losses, Semiconductor Manufacturing International Corp managed to add 0.2% and reach HK$21.90. Technical reports indicated that Huawei’s advanced smartphones, including the Mate 60 Pro, equipped with high-end chips produced by China’s largest chip manufacturer, were poised to achieve substantial sales.
The property market remained in focus as Country Garden, once China’s largest home builder by sales, faced a deadline on September 6 to pay $22.5 million in coupons on two US dollar-denominated bonds. The company did not provide comments on the matter on Monday. Furthermore, the developer faces $2.5 billion in coupon and principal payments by December 31, according to its interim report.
While property stocks surged this week due to China’s easing of requirements for first-home purchases and lowered mortgage rates, concerns persist that these measures may not sustain demand and may do little to address the issue of defaults among Chinese developers, as suggested by Nomura Holdings.
Nomura Holdings’ chief China economist, Lu Ting, stated, “Beijing may have to introduce more aggressive easing measures to ensure a real recovery.” He added that China might need to rescue major developers, lift restrictions on home prices and sales, and remove curbs on home purchases in all cities to address the situation effectively.
In economic news, a report revealed that the Caixin China PMI Services index declined from 54.1 in July to 51.8 in August, indicating a somewhat fragile recovery in the economy. However, an earlier report indicated that the PMI manufacturing gauge expanded in August, following a contraction in July.
Meanwhile, in Shenzhen, drug maker Hangzhou Minsheng Healthcare soared by 250% to 34.96 yuan on its first day of trading.
Other major Asian markets also experienced weakness, with Japan’s Nikkei 225 slipping by 0.1% and Australia’s S&P/ASX 200 losing 0.5%, while South Korea’s Kospi remained relatively unchanged.
